Day 1 - Value Function Iteration

Goals

The goals for this day are to numerically solve the model and understand how it works, using the numerical techniques covered by Stephen Terry.

Deliverables

Plot the value function against the state variables. What is the intuition?
Plot the policy function against the state variables. What is the intuition?
How do the two plots above change with the values of \(\alpha\) and \(\delta\)?
Write a subroutine that takes the model’s solution and parameters as inputs, then produces a simulated data set as output.
Use the Tauchen (1986) method to discretize the state space.

Comparative Statics

Sensitivity Analysis

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title: Day 1 - Value Function Iteration
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### Goals

The goals for this day are to numerically solve the model and understand how it works, using the numerical techniques covered by Stephen Terry. 


### Deliverables 

- Plot the value function against the state variables. What is the intuition? 
- Plot the policy function against the state variables. What is the intuition?
- How do the two plots above change with the values of $\alpha$ and $\delta$?
- Write a subroutine that takes the model's solution and parameters as inputs, then produces a simulated data set as output. 
- Use the Tauchen (1986) method to discretize the state space.
  
### Comparative Statics

### Sensitivity Analysis